ATHENS | By Nick Malkoutzis via MacroPolis | If there was any doubt that the negotiations between the new Greek government and its lenders are going to be incredibly tense, there isn’t now. The European Central Bank’s decision on Wednesday night to stop accepting Greek government bonds as collateral from local lenders has minimal practical impact in the short-term but maximum effect in symbolic terms.
MADRID | By JP Marín Arrese | Tsipras rebellion was ruthlessly quelled by the ECB governing board last night. Neither Greek sovereigns, nor publicly-guaranteed bond issues, will stand as eligible collateral for funding facilities, thus plunging the financial system into a crippling credit-crunch. The emergency liquidity arrangement managed by the local central bank severely caps new public financing to a meagre €3.5 billion amount. The new government faces the unpalatable choice between surrender or bankruptcy.
MADRID | The Corner | Despite the markets’ first negative reaction to the ECB’s restricting Greece access to its direct liquidity lines, Morgan Stanley analysts reminded on Thursday that nobody should be that surprised: in 2012, one third of the Greek balance sheets were financed by the ECB, and most via ELA. Plus, Greek banks can still get ECB liquidity if they use ECB eligible collateral.
BRUSSELS | By Alexandre Mato | The leader of the European Commission, Jean Claude Juncker, offered a friendly welcome to the Greek Prime Minister at the Commission entrance on Wednesday. There were no speeches, nor questions from journalists. After posing in front of the cameras, Juncker took Tsipras’ hand, the two leaving the photo-call as ‘lovers’. And some hours later, in a not that surprising move, Draghi banned the use of the Greek debt as collateral for the European Central Bank’s. The euro continued falling versus the U.S. dollar after the news: it hit $1.1304 — close to its 11-year low — before stabilizing at $1.1354 around 0540 GMT.
By Jens Bastian via MacroPolis | The parliamentary majority achieved by the SYRIZA-led coalition government following the 25 January elections constitutes a strong political mandate in mathematical terms. Among one of the many immediate challenges facing the new administration is trying to translate its numerical advantage into a majority of support among Greek citizens, including those who did not vote for the senior coalition party.
LONDON | Sigrún Davíðsdóttir | Forget economics, politics is key to understanding the Eurozone. The cries of “Grexit” lately have mostly been a repetition of an earlier discourse: in February 2012 Citi’s economists Willem Buiters and Ebrahim Rahbari coined the term “Grexit,” by July 2012 estimating its likelihood to 90%. Cheered on by the media, economists have taken over the debate of the Eurozone which is why much of it has been such a futile exercise: it is not economics, which ties the Eurozone together but the political determination of its leaders to make the euro work. With political will likelihood of any exit is 0. Ergo, Grexit is as unlikely now as it has always been in spite of the EU brinkmanship. One route Greece seems to be exploring is a tried and tested one: the “bisque clause” from 1946.
MADRID | By JP Marín Arrese | Attempts to convince Tsipras and his colleagues to call off their open mutiny against the discipline imposed under the Greek bailout seem to be doomed. The Greeks bet on a strategy that forces European partners to cave in, should the prospect of huge turmoil materialise. After all, they are fully aware that Greece will prove unable to repay its debt unless it grows at 7% rate for the coming 30 years.
Madrid | By Sean Duffy | Yanis Varoufakis has been causing quite a stir on his trip around Europe. The Greek Finance Minister will meet with his Italian counterpart on Tuesday, and both will be watching market reaction to proposals leaked by the Greek Government last night.
By Peter Lundgreen via Caixin | Like the Swiss, the Danes are dealing with huge capital inflows from international investors, meaning the krone is a problem for the central bank.
LONDON | BNP Paribas | Over the years we have abstained from discussing M&A scenarios among Italian banks as we always deemed it highly speculative. However we believe the proposed reform of the Italian Popolari banks (forcing them to demutualise within the next 18 months) changes everything with defensive M&A among small and mid-cap banks a distinct possibility.